The Current Spot Rate for the Norwegian Krone Is $1

question 186

Multiple Choice

The current spot rate for the Norwegian krone is $1 = NKr6.83. The expected inflation rate in Norway is 3 % and in Canada 2 %. A risk-free asset in Canada is yielding 4.5 %. What real rate of return should you expect on a risk-free Norwegian security?

• A) 4.5 %
• B) 5.0 %
• C) 5.5 %
• D) 6.0 %
• E) 6.5 %